The dangers of August. If February is the cruelest month, this one's no day at the beach. For Barack Obama, this August could be the month of storms. His approval numbers are dropping as the health care debate grows hot. Quinnipiac has the president 50 percent approval, down 7 points in a month, now to his lowest mark yet. Other polls have Obama higher, but the pattern is definitely downward everywhere.

Will this be the month that the health care debate and worries about the economy sink the president's approval number below 50 percent, or can he rally against his opponents and make the sale?

The debate got a lot uglier, with Rush Limbaugh comparing Nancy Pelosi and the Democrats to the Nazis. That comes on top of those anti-Obama town halls that featured at least one person carrying a sign that accused Obama of having a Nazi-style health plan.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Just say no! Just say no! Just say no!

UNIDENTIFIED FEMALE: Just say no! Just say no! Just say no!

UNIDENTIFIED MALE: Just say no! Just say no! Just say no!

(END VIDEO CLIP)

MATTHEWS: As we've pointed out before, this is a well-organized set of protests. Those mob scenes are supported by-well, in part by a group called FreedomWorks, and today the AFL-CIO, the labor organization, announced it's going to send people to town halls, as well, to confront the anti-Obama teams. We've got organizers on both sides tonight to show the fight right here on the set.

Plus, "The Battle for America," the story of the most exciting presidential election of our time. Why did Ted Kennedy break with the Clintons and support Obama? Who played race in this fight, and who had it played against them? And why did John McCain go with Sarah Palin? The authors of the book "The Battle for America" join us later tonight.

Also, Sonia Sotomayor was confirmed late today in the Senate by a vote of 68 votes to 31. Nine Republicans voted for her, and every Democrat present. Could that cause trouble for the Republicans with Latino votes come next November? We'll look at that in the "Politics Fix."

And what American political celebrity was offered 40 cows and 20 goats for some guy to marry their daughter? And who said it was up to the daughter to decide? That's in tonight's HARDBALL "Sideshow."

We begin with the president's slipping approval ratings, now down to 50 percent in a new Quinnipiac poll. Patrick Buchanan is an MSNBC political analyst and Bob Shrum is a Democratic analyst. Let's take a look. Here are the Quinnipiac poll numbers to look at, gentlemen. Approve the president's performance, 50 percent. Disapprove, 42 percent. That compares to only a month ago, and just a month ago, to 57 positive and 33 negative.

Now let's look at the source of this perhaps. The Quinnipiac poll asked people, How's the president handling the health care issue? And there you have it, 39 percent, very, very low for an issue that he really campaigned on, 52 percent of the people, a real majority now, opposing him.

Shrummy, are these two sets of numbers connected?

BOB SHRUM, DEMOCRATIC STRATEGIST: Well, I actually think the Quinnipiac poll is wrong. You referred to other polls at the beginning, Chris. As you know, the Ipsos poll has the president at 58 percent, and actually has a more recent set of interviews than Quinnipiac does. And there's another network that has him at 56 percent.

These polls don't matter. What matters-whether he's up or down. What matters is where they are in 2010 and where they are in 2012. The only other thing that counts in this is whether Democrats get panicked and walk away from this health care fight because the lesson in 1994 is that if they do that, they'll pay the price. The president will ultimately get reelected because the economy is going to revive, but those Democrats, and especially I think, by the way, the Blue Dogs, would pay the price in those marginal districts.

MATTHEWS: Pat, analytically, is he right that if the Democrats lose the argument and lose the bill, they're in worse shape than if they just lose the argument and pass the bill? Aren't they-aren't they better off getting a "W" next to the vote?

PAT BUCHANAN, MSNBC POLITICAL ANALYST: I agree with Bob on this. The key guys are the Blue Dogs, and the Blue Dogs got up there and many of them walked the plank on cap-and-trade and they're going to pay a price for it and you may not get cap-and-trade. Now they're being asked to walk the plank again on the dramatic health care reform.

I think they're the key guys, and if they bolt, Chris, the only thing I think Obama can get-but I still think he can get something-is sort of a scaled-down program. And my view is he ought to talk with his guys in August and say, Look, you guys, can we get the big program through? What is it going to cost? Do we have to do reconciliation? Is that a wise thing? Or are we going to have to settle? Because I do think, whatever you say, there's real erosion in his support.

MATTHEWS: Where are you, Bob? Should he settle and get a 60 majority in the Senate, a supermajority, by getting several Republicans aboard, two or three aboard, get a bill passed, get it out, sign it, move on next year to getting more something-more next year, or should he fight now with everything he's got, jam it through the Senate with 50 votes plus the vice president, take the heat from the other side and live with it?

MATTHEWS: No, but what's the-if he has to choose between a bill that comes out of that bipartisan panel in the Senate, Finance Committee, and going with a much more liberal bill, what would you do?

SHRUM: I would-I would look-I'd judge it by what's in that bill. If there's a co-op that effectively does provide competition with the insurance industry, then I think you can move forward. By the way, in other respects, that bill is not a vastly scaled-down bill. It's $100 billion less over 10 years out of a program that costs $1 trillion over 10 years.

MATTHEWS: OK.

SHRUM: So it's a pretty major bill. And I agree with Pat, he's going to get a bill.

MATTHEWS: Well, I'm with Bob on this. I think they should get-I think Bob is saying they should try to get a major bill through as big as they can, but don't take a defeat. Don't go for something they can't get, and don't try to use reconciliation, if it means, basically disaster, the Senate stops performing this year, which I think it will happen.

BUCHANAN: Well, look what Reagan did. Reagan demanded 30 percent down the line, down the line, that tax cut across the board.

BUCHANAN: I not only agree with you, Chris, I'm glad they got 60 votes. I'm glad they got a big majority in the House. I'm glad they got everything because they should have power, and then you can hold them accountable and responsible.

MATTHEWS: (INAUDIBLE) together, guys. Let's take a look at somebody who may not agree with our sort of democratic view of politics, where one side wins an election and governs for a while, then the other side challenges their accountability. Did they do the right thing or not?

Let's take a look at Rush Limbaugh today and what he had to say about the Democratic Party. Let's listen.

(BEGIN VIDEO CLIP)

RUSH LIMBAUGH, RADIO TALK SHOW HOST: No, it's right out of Adolf Hitler's playbook! Now, what are the similarities between the Democrat party of today and the Nazi Party in Germany? Well, the Nazis were against big business. They hated big business. And of course, we all know that they were opposed to Jewish capitalism. They were insanely, irrationally against pollution. They were for two years' mandatory voluntary service to Germany. They had a whole bunch of makework projects to keep people working, one of which was the autobahn. They were against cruelty and vivisection of animals, but in the radical sense of devaluing human life. They banned smoking. They were totally against that. They were for abortion and euthanasia of the undesirables, as we all know, and they were for cradle-to-grave nationalized health care!

(END VIDEO CLIP)

(LAUGHTER)

MATTHEWS: I do not know where to begin, but I'm going to start with Bob Shrum. Bob, I thought I heard everything. They are insanely against pollution. Well, there you have it. Anybody who's against pollution is a Nazi!

MATTHEWS: I mean, it's the most amazing thing-I mean, this guy is an entertainer. But is there a limit here?

SHRUM: Yes, Pat's not...

MATTHEWS: Bob Shrum.

SHRUM: Pat's not going to associate himself with any of that stuff, I don't think. It's despicable drivel.

(LAUGHTER)

SHRUM: I mean, it's also-it's factually wrong. You know, there were big German companies like Krups who helped fund the Nazi Party movement.

MATTHEWS: Sure.

SHRUM: And by the way, it's hard to believe, since I've seen all these pictures of diplomatic conferences held in Germany with high German officials there in World War-before World War II, where they're all smoking. I don't think they banned smoking. He's just made this up. I don't know, maybe he's back on whatever he was on before.

MATTHEWS: Well, without getting too personal, Shrummy, you took a shot below the belt there, but maybe it was justified this time. Pat Buchanan, what do you make of that jeremiad from Rush Limbaugh?

BUCHANAN: I think-look, I've seen pictures of him with a cigarette. But...

MATTHEWS: OK, back to the larger question.

BUCHANAN: No, big business...

MATTHEWS: Is Nancy Pelosi...

BUCHANAN: Big business was in bed with Hitler.

MATTHEWS: OK.

BUCHANAN: They helped bring him to power.

MATTHEWS: So his point's ridiculous. First of all, Hitler's impossible to figure out in terms of economic ideology, I think it's fair to say.

(LAUGHTER)

MATTHEWS: Putting him on the other side is the cheapest shot. I think anybody who uses the Hitler thing on the other side is always playing a bad game. But here's the question. How dirty is this campaign getting, Pat?

MATTHEWS: Anything goes. You call it Nazism. What further shot can you take?

BUCHANAN: Well, look, I just don't think...

MATTHEWS: Is there anything worse?

BUCHANAN: I don't think people are going to think Barack Obama's a Nazi. You know, and so, but look, I do agree with you to this extent. You should never bring the Nazis into the argument because then we're all arguing about Nazis and...

MATTHEWS: People who are anti-abortion do it, too. I think we got to stop these comparisons.

BUCHANAN: Well, I agree with you 100 percent. But conservatives are usually called fascist and all the rest of it, you know, so...

MATTHEWS: I think socialist-syndicalist, fabianist-let's get really sophisticated here. Let me ask you about this fight and Barack Obama. Is this August going to be too tough for him?

BUCHANAN: Well...

MATTHEWS: We have seen a man who's very good at politics. He got elected president of the United States, African-American. He did almost a perfect campaign. He beat the Clintons.

(CROSSTALK)

MATTHEWS: Does he have the fighting skills to win against all the organizations on the right, the Cato Institute, Dick Armey's army, everybody out there plus the Republicans?

BUCHANAN: Chris, a lot of those are really-people exaggerate their grass roots power. There's no doubt they got good power on op-ed pages and things like that. But again, I think this August is crucial. I do think Obama is bleeding on health care. I do think those Blue Dogs are going home. Some of it may be orchestrated, but you can't get guys out to every single one of these meetings that outraged and that angry. This just doesn't have that kind of clout, Chris. They can't get anybody out when it came to their amnesty bill...

MATTHEWS: OK, I have a strategy. Bob, tell me on this, because you've been through these campaigns. Could the right strategy for the president to get through this summer-because the unemployment rate is going to be horrendous again tomorrow, it'll be horrendous for months and months ahead, it ain't going to get any better-lower the temperature, get through a bill that passes muster with a few Republicans, and three of them certainly, and the moderate Democrats. Get the bill through, jam it through conference, lower the thing, don't have any more rallies, get it through, and keep his left quiet basically? Isn't that the strategy to get through the summer, don't heat up this thing?

SHRUM: Well, I think he's not trying to heat it up. I think he is trying to get a bill through. I think they will get a bill through. But I don't believe that we should let organized mobs paid for by organized money silence the president of the United States or prevent members of Congress from going home and holding town hall meetings.

I think that-an by the way, we haven't even noticed this. I suspect these tactics are very self-defeating, that when the country hears Rush Limbaugh, when it sees these people standing there screaming, "Just say no, just say no, just say no," it's not helping the Republican Party, it's hurting the Republican Party, and probably ultimately helping the passage of the health bill.

BUCHANAN: But the guys to make this judgment are not you or me or Bob Shrum sitting here.

SHRUM: I know, but we got asked to.

(LAUGHTER)

BUCHANAN: Some congressman goes home to his district, he looks out in that hall and he knows whether the people have been brought in there are ringers or whether there's a lot angry folks and upset folks, some of whom he's seen before, who don't like this thing. That's why he's in Congress, because he's smart and in touch with his people.

MATTHEWS: Exactly right.

BUCHANAN: He will come back and he will say, Look, my folks aren't with this, or, There's just a lot of ringers down there. I'm going with...

MATTHEWS: By the way, he will talk to his lawyer, his doctor, the people he goes to church with...

BUCHANAN: They're all...

MATTHEWS: ... the people he goes to the beach with, the regular people he's known for 30 years, and he's going to ask them, What do you think of this thing?

It is going to be one hot August, even though the temperature, by the way-global warming's getting weird in this town again.

(LAUGHTER)

MATTHEWS: This is not August.

BUCHANAN: It's getting cooler, Chris!

MATTHEWS: Coming up: Those conservative protesters are turning congressional town halls into town brawls. Let's talk about them. Let's go inside now. We want to know how spontaneous are these events and how much are they what's called "astroturf," phony grass roots. And now the unions are organizing on the other side. We're going to have mob versus mob. How much of this is real, how much of this is organized? Can the Democrats use these disruptions politically against the Republicans? We'll see. We're going to get to the bottom of it all and hear from both sides coming up. In a minute, in fact, we're going to be doing that. Stay with us.

You're watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: Welcome back to HARDBALL. Conservative groups like FreedomWorks continue to support those aggressive protests at Democratic congressional town meetings on health care, and now the AFL-CIO is pushing back and plans to send their own people to these town halls for what could amount to a showdown between the union guys, union women, and conservative activist.

Max Pappas-love that name-is the vice president for public policy at a group called Freedom Works, and Gerald Shea is the health policy analyst for the AFL-CIO.

Gentlemen, you're both professionals. Tell me about this. The issue's come up whether you guys are astroturf or not. Are you a paid official of this organization?

MAX PAPPAS, FREEDOMWORKS: I am. I work at...

MATTHEWS: You're a professional.

PAPPAS: I work at the headquarters in D.C.

MATTHEWS: You work for-and you get a salary from them.

PAPPAS: Yes.

MATTHEWS: Are you a lobbyist?

PAPPAS: No, I'm not.

MATTHEWS: Well, how do you-how do you-you're here lobbying. I mean, you're lobbying Washington and you're pushing a point of view. How come you're not a lobbyist? I mean, how come you don't have to register?

MATTHEWS: And how do you organize these meetings, these-these-where people do like the ACORN-type meetings, where they show up and...

PAPPAS: Mostly through the Internet.

MATTHEWS: OK.

PAPPAS: Yes. We have about 400,000 on-line members who we can contact with an e-mail database that we have, send them information about when the town halls are, give them briefings on the health care reform plans.

MATTHEWS: so when you watch television, you see a disruption at a congressional meeting in Long Island, you see one in Philly, you see one down in Texas, you can spot-you know that's coming ahead of time. You know each-in other words, you know what's going to happen at each one of these events.

PAPPAS: No, we've been telling people to go to talk to their congressman for 25 years. That's how long FreedomWorks has been around.

MATTHEWS: But you're-but you're basically plotting this stuff.

PAPPAS: We're telling our...

MATTHEWS: People aren't spontaneously getting up in the morning and reading the paper and going, I better go to the congressman's meeting. I'm all upset about health care.

PAPPAS: Oh, no. We tell them when the events are. We just usually don't get this many people on our side to show up.

MATTHEWS: OK, so the question-are you astroturf or are you grass roots?

PAPPAS: Well...

MATTHEWS: Astroturf means an organized professional operation which leads to these rallies, rather than something where a bunch of people are reading the paper that morning and they go, God, I better get down to headquarters.

PAPPAS: All the people...

MATTHEWS: I better get to my congressman.

PAPPAS: ... who are showing up are volunteers. If you're talking about astroturf being where you bus people in...

MATTHEWS: No, where you organize, is what I mean.

PAPPAS: Maybe like Moveon bussed people in, or if you have paid people like the unions do, no, we're not astroturf. We don't do that. Ours are all volunteers. You'll see their hands-their signs are painted by hand.

MATTHEWS: OK. OK. Great. Let's you go to you, Gerald. What do you make of this?

GERALD SHEA, AFL-CIO: You know, people-it's really important that we have town hall meetings where people can discuss issues, and there's no more important issue than health care in the country today. People are just getting killed with health care costs, and this situation just is untenable as it stands now. So it's really important that this happens.

I think it's really unfortunately that people are trying to disrupt these meetings, and using phrases like "Just say no" is not going to get us a solution to the health care program.

MATTHEWS: Is that the right way to approach this debate over health care? We've been having this debate since Truman's time. We're not getting anywhere. We don't have a bill. Republicans say they have alternatives, but they never push them when they're in power. I keep asking these Republicans that come on-We got alternatives. I say, Well, why don't you ever push them through when you're in power? Then we won't have the Democrats saying nothing's been done.

PAPPAS: That's another huge failure of the Bush administration. We've been calling for health care reform for a decade. And unfortunately, we don't see any of what we've been calling for in this proposal, which is why we're opposing it. We want reform, it's just going in the opposite direction of what we suggest...

MATTHEWS: Well, these people who "Just say no," are they saying "Just say no" to reforms that stop people from being denied coverage for pre-existing conditions? Are they saying "Just say no" to portability, the ability to change jobs and keep the same health care plan? What are they saying no to? Do they really know, or is it just what you feed them?

PAPPAS: I think they know something about...

MATTHEWS: What do they know...

PAPPAS: ... the four pieces of legislation that have passed out of committee and Congress and they don't like those packages as they are I think. Maybe they're hoping...

MATTHEWS: Well, they don't seem very sophisticated. They're just yelling no. What are they all saying no to? If I took each one of those people and put them under sodium pentothal and asked them exactly what they're saying no to, what do they know they're saying no to?

PAPPAS: I'd say they're saying no to the Senate bill that's come out of committee. They're saying no to the three committee pieces that have come out of the House.

They know that each of those have something in common. They're all different aspects, but they all have a movement toward more government in health care...

MATTHEWS: I never met a person in the world that wants to get rid of Medicare. Not a single person.

PAPPAS: But it's running out of money. And they're afraid that we're going to get a system where everybody's health care is running out of money sort of like Medicare is running out of money.

MATTHEWS: Gerald?

GERALD SHEA, AFL CID (ph): As far as I can say they're just saying no to government involvement at all and frankly that's what got us in the health care crisis we're in today. We deregulated health care in the '80s and prices just skyrocketed.

MATTHEWS: Well, some of these imbeciles-and they're led to be imbeciles by some points of view here-say keep the government out of Medicare. How can somebody say-it's an entire government-run operation initiated by the government by the Democrats and Lyndon Johnson back in the '60s.

But they say keep-how do you-that's demented talk.

PAPPAS: You can't do that.

MATTHEWS: Why do people come and say just say no, keep government out of Medicare. It's balloon-head talk.

PAPPAS: Some people aren't that well-informed.

SHEA: And the projections are that if there were this modest public health insurance option that people are (INAUDIBLE) in the bills-you know, it would cover 8 million people, 10 million people. It would not be a huge coverage.

This is not going to replace private insurance. It hopefully is going to provide some real competition to force prices down. That's the whole ball game here is controlling costs.

MATTHEWS: What do you folks in FreedomWorks want to do for the 40-some million people that don't have health insurance. What are you going to do for them? Just tell me, if there's nothing, say nothing.

PAPPAS: No, we want reform.

MATTHEWS: What do you want to do for them so they get health insurance-accessible and affordable?

PAPPAS: A big chunk of those people earn over $50,000 a year. Another chunk qualify for s-chip, which is government health care for the kids, Medicaid, which is government health care for the poor, and Medicare which are 65 and over.

MATTHEWSS: Why are emergency rooms packed with people who wait four or five hours to get something basic handled that should have been part of their primary care. If they're all insured, why are there in the emergency rooms?

PAPPAS: There are about 16 million people who don't fall into any of those categories and would qualify for some sort of government program. And we need to look at...

MATTHEWS: Are you saying people are covered?

PAPPAS: No. There are 46 million people in America who don't have insurance. But a big chunk of those...

MATTHEWS: But you're saying there's no problem with people not being insured in this country.

PAPPAS: No, I'm saying there is about 16 million who we should probably focus on trying to find a way to lower the cost of health insurance so we can get them insurance.

MATTHEWS: But why don't the Republicans ever do that when they're in power? Why don't you do it?

MATTHEWS: ... ever pushed a bill to help those 16 million? When did you do it?

PAPPAS: Sure. Senator DeMint had a bill...

MATTHEWS: Senator DeMint?

PAPPAS: Yes.

MATTHEWS: Senator DeMint is an activist for health care? He is the most anti-government conservative guy in the world. You're saying he had an activist program to do something for the uninsured.

PAPPAS: It's on (INAUDIBLE) in the House. And one thing that their bill has in common is they removed the limit of buying health care over state borders. I can buy anything in one state or another state except for health insurance. I have to pay $1,000 a month if I'm in New Jersey...

MATTHEWS: I can understand why you don't like big government. But this is the incredible part of your argument because when you are in power-

Ronald Reagan they used to say, well, he had a different approach to Medicare. His approach was the NA approach-no approach.

It's fair enough. Just say you're conservative. You're willing to suffer the loss of people who don't have health care. It's better that way...

MATTHEWS: You want it both ways. You want to be seen as compassionate but not do anything.

PAPPAS: Let us buy insurance over state lines.

MATTHEWS: We've had Reagan in charge. You've had George Bush First in charge. You had two terms of George Bush Jr. And at no time in that have I had somebody come on this show or anywhere else saying we have to get a Republican health care plan to help uninsured people get insured. You guys are frauds.

PAPPAS: We were as disappointed as you are...

MATTHEWS: Where was the we?

PAPPAS: We're pushing them to do ...

MATTHEWS: This guy is the only guy since Truman with a chance to get a health care plan and you guys are trying to kill it.

SHEA: The issue here is controlling costs. Right now we have a monopoly by private insurers. Most states have two or maybe three insurers who control the entire market or 75 percent of the market. There's no competition. Their relationship with hospitals is basically a cozy relationship.

They pay them to bill all these new buildings and had all this experience and so forth. The prices are going sky high.

It's not just a problem of some people who don't have insurance...

MATTHEWS: Ok Gerald, I'm going to be tough with you for one minute. Are you guys going to back this health care plan or are you going to bitch and moan and say it's not enough?

SHEA: We are going to back it.

MATTHEWS: You're going to back it.

SHEA: Yes.

MATTHEWS: Ok. Thank you very much.

Max Pappas thank you sir. Holy Cross grad-I should be nice with you but I disagree with your whole crowd. That's all right.

Up next, what American political figure was offered 40 goats and 20 cows or 20 cows and 40 goats for their daughter's hand in marriage and who said let her decide? That's choice. That's next in this-I shouldn't say that way.

That's next in "The Sideshow." You're watching HARDBALL only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: Back to HARDBALL. Time for "The Sideshow."

First, some throwback diplomacy: check out the offer posed to Secretary of State Hillary Clinton at a town hall today in Nairobi.

(BEGIN VIDEO CLIP)

FAREED ZAKARIA, CNN ANCHOR: A Kenyan city councilman says he offered Bill Clinton goats and cows for his daughter's hand in marriage five years ago. He is still awaiting an answer.

HILLARY CLINTON, U.S. SECRETARY OF STATE: Well, my daughter is her own person. She's very independent, so I will convey this very kind offer to her.

(END VIDEO CLIP)

MATTHEWS: Letter her daughter make the call. That's diplomacy.

Next up, it's the 2010 primary to watch nationwide. Democratic Congressman Joe Sestak made it official this week jumping into the race against Senator Arlen Specter in Pennsylvania.

Here he is last night getting the most wondrous of salutes from Stephen Colbert. Wait until you catch this.

(BEGIN VIDEO CLIP)

STEPHEN COLBERT, HOST, "THE COLBERT REPORT": You made your announcement yesterday against Arlen Specter who was a Democrat who became a Republican, is now a Democrat again. And he said of you, he called you a flagrant hypocrite who registered as a Democrat only in time to run for Congress. Don't you have to give him credit just for having giant swinging balls?

(END VIDEO CLIP)

MATTHEWS: Well, actually I think it's Sestak who deserves that kudo.

Specter has got a huge lead in the numbers right now.

Now the old rule that politics make strange bedfellows-make that surfmates. Guess who's hitting the beaches of California later this month? Republican Congressman Dana Rohrabacher who is from out there along with Massachusetts Congressman Barney Frank.

Rohrabacher told Politico he invited Frank and his partner and set them up at a surfer's hotel because Frank's partner is a suffer and Frank, quote, "will probably have to lie on the beach like a whale." Isn't this a great country?

Finally, Mitt Romney is coming out with a book near you-coming to a bookstore near you. The once and most likely future presidential candidate has inked a deal to publish "No Apology: The case for American greatness." An apparent reach by the well-born and Ivy League-bred Romney for the Soddy (ph) buster vote-I say we should make these guys write these books in public at some Starbucks somewhere so we can actually watch them writing the books instead of some ghost writing them.

I think Obama is the only politician in modern history to actually write his own book.

Time now for tonight's big number. Nine Republicans out of 40 Republicans in the Senate voted for Judge Sotomayor today. But out of the six Republicans retiring right now-next year, how many voted for Judge Sotomayor? 4, 4 out of 6; two-thirds: Mel Martinez, Kit Bond, Judd Gregg and George Voinovich. Four of the six retiring Republicans voted for Sotomayor. You figure that one out. That's tonight's food for thought "Big Number."

Up next, the definitive story of the 2008 presidential election from the primary battles between Barack Obama and Hillary Clinton to the ascension briefly of Sarah Palin to the national stage. We've got Dan Balz and Haynes Johnson, authors of the fabulous new book "The Battle for America in 2008." They're coming right here to sit with me to tell us what McCain really thinks of Palin and what Ted Kennedy wanted-well, what was he after when he backed Obama?

You're watching HARDBALL only on MSNBC.

(COMMERCIAL BREAK)

JULIA BOORSTIN, MSNBC CORRESPONDENT: I'm Julia Boorstin with your "CNBC Market Wrap." Stocks posting modest losses today as investors anxiously await tomorrow's release of the July jobless report. The Dow Jones Industrial was down more than 24 points. The S&P 500 down a little more than 5.5 and the NASDAQ finishing almost 20 points lower.

Traders are focusing on jobs as a prime indicator of economic recovery. Today's weekly report showed new claims falling more than expected, but ongoing claims continue to rise indicating new layoffs are tapering off but job creation is still lagging.

Financial stocks are big gainers on the Dow today with American Express and Bank of America and AIG all moving higher.

Major retailers released disappointing July sales report today that fell short of already low expectations. Most retail stocks moved sharply higher on some encouraging earnings for chains like Macy's, Cole's (ph) and the Gap (ph).

That's it from CNBC, first in business worldwide. Now back to HARDBALL.

MATTHEWS: Welcome back to HARDBALL.

A year ago Barack Obama's team was wrapping up a masterfully executed quest for the Democratic nomination for president and Sarah Palin was about to become the Republican's national superstar.

Today the Obama team is struggling to sell health care and Palin is sort of out of a job, isn't she? Well, maybe by her own decision.

Dan Balz is the national political reporter for the Washington Post and Haynes Johnson's a political prize-winning reporter and bestselling author. Together they are the authors of the great new book, "The battle for America 2008," the story of an extraordinary election.

What I like about it is you two pros have seen a few elections, especially Haynes. You know what an extraordinary one looks like. What struck me in your book is how it came across-the parts I read in "The Post"-crystal and clear. Nothing complicated, nothing murky.

There's certain clear points in the campaign that made all the difference and I'm going to go back to my favorites, right?

Hillary Clinton backed the Iraq war. That croaked her. Among caucus attenders, the people with college degrees, the kinds of people that sort of evoke the '60s still, the kind of people that make the Democratic Party work.

HAYNES JOHNSON, CO-AUTHOR, " THE BATTLE FOR AMERICA 2008": She never got out of it. She was trapped by that and caught in it and couldn't work her way out. They wanted her to be strong, the commander in chief, but she was just trapped in this miasma.

MATTHEWS: Why didn't she buckle and say cut their losses. This party is never going to nominate a hawk in 2008, saw it coming, and changed.

JOHNSON: She kept moving and moving and moving but everything was against her. All the climate was against her. Then there was Obama with this enormous enthusiasm in speaking. He just never came out of it.

DAN BALZ, CO-AUTHOR, "THE BATTLE FOR AMERICA 2008": There's another reason that she didn't, because one question that she had facing her was what does she really believe in? The longer she had stuck with her position on the war, no time table, she really didn't want that...

MATTHEWS: And permanent bases.

BALZ: They reached a point where they believed it would cost her more if she took back that vote than to stick with it.

MATTHEWS: Well, in the end do you believe what I-do you believe it was decisive, that war issue.

MATTHEWS: That Barack was against the war from the beginning and she was for it.

BALZ: I believe it was hugely significant because it created an opening for Obama that nobody else could claim early in the race. And it gave him a tremendous amount of push among the activists-as you said-the people who play a real role in caucuses and in even a lot of primaries.

MATTHEWS: What struck me was some of the best of the liberals. I make a value judgment about it. The people like Gregg Craig (ph), Ted Sorenson (ph), some of the really good patriotic smart liberals, went with Obama in the beginning.

And the Kennedys came along after them ironically. They followed their like-thinkers. What was that all about? Why did Ted Kennedy, Vicky Kennedy and a couple of the other Kennedys back-Caroline especially-back Obama?

JOHNSON: From the beginning Ted Kennedy saw in Obama his brothers. The more he talked about it, a young generation, appeal-it was like jack and bobby. He wouldn't endorse, but he was-they were close.

When Obama came to the senate, he looked up Ted Kennedy. He courted him.

And also, he liked the way that he spoke on the war.

And early on before-long before he became a U.S. Senator he had given that great speech in Illinois about the war which was absolutely prescient, what might happen if we went into Iraq. So he was persuaded to go with Obama.

MATTHEWS: What's interesting is Steve Schmidt-I really like the guy-

I guess you guys have dealt with him more than I have up front-he said during the campaign, and this got out later, he said he could tell he was running against a continuation of the Bobby Kennedy campaign. That's a pretty prescient thought for the guy on the other side.

BALZ: Well, he did understand that. Ted Kennedy also saw in Obama somebody that he believed could begin to transcend some of the differences and divisions in the country. Not just racial divisions, but certainly some to that, but also to move the country to a different place in politics.

I mean, he admired Hillary Clinton. And he had a good relationship going into the campaign with Bill Clinton. But he saw in Obama somebody who could be the future, and he did not think at that point Hillary Clinton could be that person.

MATTHEWS: You earned your spurs covering the civil rights movement. What did Bill Clinton say to Barack Obama on the phone that made him feel Teddy had gotten off the reservation, in terms of race and civil rights?

HAYNES: That was so emotional. As you know, Bill Clinton got attacked because of the racist comments in South Carolina and the rest-

MATTHEWS: All he did was compare the Obama campaign to the Jesse Jackson campaign.

HAYNES: I know, but he was getting hit very hard, and Clinton blew it. He got very angry about that. I am not a racist. My whole background, look at our record, so forth and so on. And they had this conversation-

MATTHEWS: He said that to Teddy.

HAYNES: Well, they talked about that.

MATTHEWS: You're being cute about-what can you report about what Bill said to Barack or said to Ted?

HAYNES: And Hillary-well, because Teddy did think race had entered into the campaign. There was a sense that this was falling apart. And there was a racial context that we shouldn't have race entered into any more than it is, particularly with a black candidate like Barack Obama.

HAYNES: Not entirely. No. There was the one conversation that we could never pull everything out of. It happened the day after Iowa, a conversation between Bill Clinton and Ted Kennedy. There is something that Bill Clinton said in that conversation that set Kennedy off. We have never been able to find out exactly what it was.

That set the tone. Then there were a series of other things that happened. There was the comparison-the Jesse Jackson thing came much later. There were other things that were happening in the Clinton campaign. You remember, Bob Johnson, the BET founder, who talked about-with Hillary Clinton on the stage, talked about Obama in the hood and then denied that it had anything to do that he was trying to inject either drugs or race into it.

Kennedy was just upset by the idea that race was being injected into the campaign. He blamed the Clintons for allowing it to happen. The Clintons were furious that they were being accused of injecting race. Bill Clinton is the kind of candidate, and with some justification-his whole political career, he would say, would be aimed at bringing the races together. The idea-

MATTHEWS: I think that's a value thing and you have to give him credit. It is his values.

Let's talk about the other party, the Republican party. Everybody who has ever followed John McCain it seems respects the guy. He was the most media popular guy in the world. I accused me of being for him. He said, Chris used to like me, and then this other guy came along and then-he said this at the Al Smith Dinner. It was a riot. He said I can do maverick. I can't do messiah, which is very funny.

But why did he pick Palin, because that seemed to be a real Hail Mary for him?

HAYNES: It was a Hail Mary. They new they were going to lose. They thought they were going to lose coming out of the Democratic Convention in Denver. At that point, Obama was surging ahead. They knew they had to shake up.

They talked among themselves that even if they got a good candidate that everybody liked-

HAYNES: No, they had to get somebody to shake up. They also wanted to appeal to the women who had been for Hillary, who seemed disaffected, perhaps. They might be able to bring them in. So they went through this process of who are they going to get.

There's this woman up in Alaska, and they go through this-

MATTHEWS: What part did Bill Kristol and Fred Barnes play in this, the guys from the "Weekly Standard?"

HAYNES: Big.

MATTHEWS: What was their part. They went up for a cruise.

HAYNES: They met her. They liked her. They wrote flattering pieces about ether. They sent out stuff. It didn't reach in the news media much, but they were promoting among the Republican base.

MATTHEWS: This is so generically awful about politics. Who was it-it was Roger Ailes, who I think is great in many regards-Roger Ailes came up with the idea of Dan Quayle for George Bush Sr.. These advisers come up with these Hail Mary. This is going to win. This is the chance. This is going to turn everything around. And the guy buys it from somebody like that.

Ailes gave us Quayle. Kristol is really smart and he gave us this guy.

BALZ: I think it's three or four people. It's Rick Davis, who was the campaign manager, Steve Schmidt, who was the senior adviser at that point, and helping to run the day-to-day operations.

MATTHEWS: And A.B. Culvahouse.

BALZ: A.B. to some extent. A.B. was-

MATTHEWS: They thought she was the genuine article. She was going to turn this thing around.

BALZ: No, they thought this was a political risk, but one that they were prepared to take.

MATTHEWS: But they knew it was quicksilver, didn't they? They knew it would only last for a while. Did they think she was secretly deep?

BALZ: No, that's the problem. One of the things we say is the book is she was legally vetted, legally vetted, but not politically.

MATTHEWS: OK, this is a hell of a book, by the way. You're only getting a taste of it. "The Battle for America, 2008," buy it, keep it on your shelf next to like "Truman." This is a book you want to keep for a while and savor for the beach. This month.

Up next, only nine Republican senators voted to confirm Sonia Sotomayor to the Supreme Court. Only nine. By the way, like half of them are retiring. What does that tell you? We are going to try to figure that one out. There is going to be a political price paid, fairly or not, for this ethnic factor.

Are they kissing good-bye the Latino vote? Well, that may not be the best way of putting it, but we will talk about that in the Fix, when HARDBALL comes back on MSNBC.

MATTHEWS: With that vote, the Senate made history today. The Senate confirmed Judge Sonia Sotomayor, the first Hispanic justice to serve on the Supreme Court. Unbelievable, the first ever. The vote was 68 to 31, with nine Republicans joined the Democrats. Ted Kennedy couldn't vote because of health reasons.

So what are the political consequences? Time for the Fix. MSNBC political analyst Maria Teresa Kumar is the founder of Voto Latino. And Roger Simon writes for the "Politico."

So let's talk ethnic politics. Is this going to be a crashing defeat for the Republicans, people like McCain, Kyl, people out west especially?

MARIA TERESA KUMAR, VOTO LATINO: This is a softball from the Obama administration when they put up Sonia Sotomayor. She was such a traditionalist. She is not a judicial activist. And the Republicans, all they had to do was maintain an even tone and not go after her, and basically actually win some points.

MATTHEWS: You think they should have gone soft on her for political reasons?

KUMAR: Not for political reasons. I think it's fair to vote against someone if you don't believe in their qualifications. But she was incredibly qualified. The tone that surrounded her-I remember watching those hearings. We saw those confirmation hearings. I felt uncomfortable. It made me, not only as a woman, but-

KUMAR: Well, Lindsey Graham, when he started off his conversation by saying, you know, I like Hispanics, and then went after her, that was uncomfortable. Because, as a woman, it was condescending. Everybody saw him shaking his finger at her, asking if she had the right temperament. It doesn't bode well, not only for Latinos, but for women.

MATTHEWS: But he voted for her.

KUMAR: Because he's smart. If you actually look at the redistricting, what's going on in the background-

MATTHEWS: OK. Roger, these guys knew all this when they voted against this Hispanic candidate. They knew they were going to have trouble at home. They obviously thought either they don't like her, which I think is a big part of this-I don't think they liked her. I think they thought this woman was going to try to redress past grievances. She was going to use the power of the court to fix things back the way they should have been or whatever. And they didn't like it.

They saw attitude there and didn't like it. That's what I think.

ROGER SIMON, "POLITICO": The no vote was the easiest vote for them to take.

MATTHEWS: Really? You listen to this and say that?

SIMON: Look, for one thing, she got nearly one out of every four Republican votes. Let's give credit there. She got nine votes. They only had 40.

MATTHEWS: But half those nine were people that are living.

SIMON: Who did the right thing because they're leaving. But a no vote is much easier. If you cast a yes vote on her, if you break with the party and cast a yes vote, and she issues some, you know, ruling, even if it's just one vote and eight against, that says all guns should be banned against America, you're going to face a lot of trouble.

If you vote no on her, and she does something great, no one is going to come and blame you. You voted no on her; she's the greatest justice of all time. You just say, well, she grew into the job.

MATTHEWS: I think it's also a primary versus a general election question. You want to help yourself in the primary, vote against her. You want to help yourself in the general, vote for her.

We'll be right back with Roger and Maria for more of the fix. Let's talk about these town hall brawls, because it looks like they're going to be joined by the labor movement on the other side.

You're watching HARDBALL on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: We're back with the fix. Let's go to Roger and Maria. Let's take a look, first of all, at Rush Limbaugh's rant-and I generally don't say this-his rantings today. The Democrats and the Nazis are one and the same. Believe me, that's what he's saying.

(BEGIN VIDEO CLIP)

RUSH LIMBAUGH, RADIO TALK SHOW HOST: I have always bristled when I hear people claim that conservatism gets close to Nazism. It's liberalism that's the closest you can get to Nazism and Socialism. It's all bundled up under the Socialist banner.

There's far more similarities between Nancy Pelosi and Adolph Hitler than between these people showing up at town halls to protest a Hitler-like policy. That is being heralded by a Hitler-like logo.

MATTHEWS: This logo-we have to show-Rush is-I'm going to say it, he's all wet. This logo looks like the Coast Guard Academy. I don't know what it is, but it looks nothing like a neoclassical Nazi standard of any kind. What's going on here?

SIMON: It's always a mistake to compare anyone-

MATTHEWS: Anything, including abortion or anything.

SIMON: I didn't like it when Seinfeld did the soup Nazi. You just don't do it. It's always over the top. It's always wrong. He's wrong on the fact. The Nazis were not true socialists of any form, even though they had socialist in their title, SDAP .

I mean, he's just wrong, and it's dumb, and some-

MATTHEWS: Why is he doing it?

SIMON: God, could ratings be part of it? Maybe he believes it. Its the hardest thing for the media to do is avert its eyes and to just say, we're just going to let this pass by. We're not going to gawk at the car wreck. We always gawk at the car wreck.

MATTHEWS: And I also think the Republicans are getting a little nervous, too, because they're becoming more and more identified with the fringe. That's not a good place-

MATTHEWS: You really believe that? I think it's stirring up the base. I think it's getting people that normally were bored with politics, that really didn't have any problem with Obama, to feel hatred now. I think this stuff works, this stirring and stirring and stirring, by Glenn Beck and him and all others, and saying they're Nazis, and charging he's from some other countries, from the Swahili part of Kenya. He's really a Muslim. They're back to that again.

Most Republicans now either don't believe he's an American or aren't sure. It is not a joke. It's getting very earthy.

KUMAR: And I think what the White House needs to do is they need to have the same rapid response that the Clinton administration did and be on the offensive. Right now, they keep using this issue and saying, you know what, we're kind of above this. No, you're not, because the American people are starting to listen.

SIMON: We tent to forget-in what was overlooked in the justifiably good feeling of Obama's election was that Obama lost the white vote by a landslide. He lost it 55 to 43. So he is still winning over white America.